The Clinton administration yesterday announced a proposal to phase out a widely used gasoline additive that has significantly reduced air pollution from cars and trucks but has inadvertently contaminated much of the nation's drinking water supply.

The move aims to reduce or eliminate the use of methyl tertiary butyl ether, or MTBE. The chemical is added to about one-third of the nation's gasoline supply, especially in smoggy areas, to cut emissions of carbon monoxide and airborne toxins and to reduce levels of lung-damaging atmospheric ozone. When ingested, however, MTBE is considered a possible cause of cancer, and it has been showing up in many wells and other sources of fresh water since federal clean air legislation made it a popular fuel additive a decade ago.

"MTBE is a problem that must be addressed. If we delay too long, the problem will become worse," said Environmental Protection Agency Administrator Carol M. Browner at a news conference with Agriculture Secretary Dan Glickman. "Americans deserve both clean air and clean water, and never one at the expense of the other."

Many scientists and legislators already agree that MTBE must go, but the administration's proposed approach to doing so is by no means assured of success. That's because the Clinton plan explicitly calls, as a substitute for MTBE, for increased use of ethanol and other agriculturally based fuel additives, made mostly from corn. That has rekindled a simmering political, economic and scientific battle over biofuel's place in the nation's energy program.

Some scientists have questioned ethanol's usefulness as a pollution reducer, while others question the wisdom of burning large quantities of ethanol, the kind of alcohol found in alcoholic beverages.

Almost all studies of ethanol's health effects have focused on what happens when people drink it, they note, not when they breathe it.

"Ethanol, when combusted, forms formaldehyde and other byproducts which pose potential public health threats," said Patricio Silva of the Natural Resources Defense Council, a Washington environmental group that generally supports the EPA's move but is wary of a sudden reliance on ethanol.

Politics may pose an even larger obstacle to the administration's plan. President Clinton has long supported the fledgling ethanol and biofuels industry, a position that has won him strong backing from corn-growing states over the years and that prompted praise yesterday from Corn Belt Sens. Tom Harkin (D-Iowa) and Thomas A. Daschle (D-S.D.).

That led some in Congress to complain yesterday that the plan was designed to benefit Vice President Gore's standing in the Midwest as he heads into this fall's race for the presidency.

"This is so transparently political," said Eric Wohlschlegel, a spokesman for the House Commerce Committee chaired by Rep. Thomas J. Bliley Jr. (R-Va.), who has held several hearings on MTBE. "The EPA administrator should spend more time creating good public policy than playing campaign manager to Al Gore."

Browner countered that the agency's actions were based on sound science and public health considerations. "Far too many communities are experiencing levels of MTBE in their drinking water," she said in an interview. "This is not the time to engage in partisan politics."

MTBE has come into vastly increased use in gasoline since the Clean Air Act Amendment of 1990 required the creation of a "reformulated fuel" program. That program requires refineries to increase the oxygen levels in gasoline, which reduces toxic emissions that can themselves cause cancer or get converted into ozone, which can cause permanent lung damage. MTBE is today the oxygenator of choice in about 85 percent of the nation's reformulated fuel.

But in recent years, it became increasingly clear that many underground storage tanks were leaking MTBE, which, unlike many other fuel-related chemicals, tends to move easily through soil and quickly enters ground water supplies. Accidental spills--and small leaks from older boat engines into lakes--also have contributed to the problem.

Most of the major contamination sites found to date are in California, which has already moved to ban MTBE. But as many as 9,000 community water wells in 31 states may be contaminated from an estimated 250,000 leaking tanks, according to a new study by researchers at the U.S. Geological Survey and the Oregon Graduate Institute of Science & Technology in Portland, which will be published in the May 1 issue of the journal Environmental Science &amp; Technology.

Earlier this year, Maryland officials reported that MTBE was found in 66 of 1,060 public water systems tested, and in more than 200 private wells. In 1998, two town wells in Purcellville, Va., were found to be contaminated with MTBE.

Most affected water sources are contaminated at levels below those deemed dangerous by federal officials. But because the chemical tastes and smells so foul even at vanishingly low concentrations, many of these water sources have had to be abandoned.

First she called upon Congress to amend the Clean Air Act to reduce or eliminate MTBE while ensuring that hard-won air quality gains are not lost. Specifically, she asked Congress to promote the growth of renewable fuels and additives, "particularly ethanol."

Significantly, the proposal drops the old law's requirement to boost oxygenate levels in gasoline to the 2 percent level, substituting instead a requirement that fuel contain a certain amount of renewable fuel.

The petroleum industry, which claims it is already making cleaner fuel, is opposed to such a system, which in its view simply substitutes one mandate for another.

"Now is not the time to rush into a new fuels mandate," said oil-state Sen. James M. Inhofe (R-Okla.).

As a "backstop" strategy, Browner said, the EPA would try to use the Toxic Substances Control Act to regulate MTBE out of the fuel supply. But that approach poses several difficult legal problems, she said, and would no doubt take longer than a prompt legislative response.